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Topic: Republican Tax Plan 2017 (Read 120061 times)

I don't agree that there is not a correlation, it looks like there is from the chart (even though it's the wrong chart that you display).

It makes no sense to standardize for the cost off living, that's the point in the first place that NY etc have higher taxes partly because of the higher cost of living and therefore have higher wages and expenses and pay more federal tax. So the only relevant chart is the one you mentioned and linked to not the one displayed in the post. There does appear to be a pretty clear trend that blue states pay more in both local and federal taxes and that there is a strong correlation between states having high local and federal tax payments.

... the high tax states have thriving economies and are already paying the lions share of federal taxes...

I'm not convinced the above statement is true, so I decided to actually dig up some data on this. Figuring out what counts as a high tax state is complex. For example CA has an early high top state income tax rate, but it doesn't kick in until your income is $1M/year, so the average californian pays less in income tax than the average oreganian, despite the top tax bracket being lower in in OR.

Anyway, so I've decided to look at total state and local income and property tax collected per capita for classifying states as high or low tax and total federal income taxes paid per capita for classifying states as paying the lion's share of federal taxes or not. I've also controlled for variation in cost of living across states using data from here.

As you can see, there is actually is a small amount correlation between state tax burden and contribution to federal income tax. However, I should also point out that most of the strength of this relatively weak correlation strength comes from five states (MN, NJ, MA, CT, & NY), and you don't see much of a trend at all in the 44 remaining states (since we also have to throw out delaware).

Controlling for the local cost of living seems like a strange choice, given that the tax brackets aren't similarly adjusted, and all the states use the same single currency that the federal government uses for expenditures. To my eye, the correlation looks stronger without that adjustment.

What was your source for the tax collections? A couple that struck me as unlikely on the federal side (AR and NE) in fact don't match the first article I pulled up.

I don't agree that there is not a correlation, it looks like there is from the chart (even though it's the wrong chart that you display).

It makes no sense to standardize for the cost off living, that's the point in the first place that NY etc have higher taxes partly because of the higher cost of living and therefore have higher wages and expenses and pay more federal tax. So the only relevant chart is the one you mentioned and linked to not the one displayed in the post. There does appear to be a pretty clear trend that blue states pay more in both local and federal taxes and that there is a strong correlation between states having high local and federal tax payments.

I'd certainly agree that -- all things being equal -- people in a city where costs of livings (and hence salaries) are twice as high will pay more in a progressive federal income tax system than people in a city where the cost of living (and hence salaries) are more reasonable. That's a different argument from the argument the economies are thriving in high tax states and thus they pay more in taxes, which is what I understood you to be saying in your previous post.

Also, note that I didn't say there wasn't a correlation, I said that the correlation wasn't that strong and that is was mostly the result of five states.

-Using data from every state but Deleware, there is a statistically significant correlation between federal tax paid per capita and state income/property tax paid per capita. However, the R^2 of the correlation is only 0.264

-Take out the five states I mentioned in my first post, and there is no statistically significant correlation between the two measures of tax burden in the remaining 44 states.

@Undecided, sure thing, I should have done a better job of documenting my sources in the original post but it was already getting rather long.

Indeed. I can certainly see the arguments on either side about including sales tax. Generally sales tax deductions are going to be less useful for putting you above the filing threshold than income tax deductions (going back to the OR/WA example, despite bringing in more total revenue per head in Washington, a smaller proportion of Washington residents are able to itemize on their federal returns).

But you're right, adding in revenue raised by sales taxes does make the correlation a bit stronger.

(Now we're up to a R^2 of 0.355 with every state by Delaware, and a still marginally statistically significant R^2 of 0.154 if we exclude the five high tax states from my first post.)

I think many of them do have thriving economies and high taxes, I'm not saying that high taxes is the reason their economies are doing well.

e.g In NYC area and SF Area taxes are super high as are wages/costs, they are connected because the Govt has to hire teachers, police, fire, etc and have to pay more for this than they would in a lower cost area.

Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

Also, given that most Americans pay quite modest income taxes, and that in any state it's likely that people who itemize are (very) disproportionately represented among the people who pay more than the mean federal income taxes, whether sales taxes are a major factor in having itemized deductions above the standard deduction seems like somewhat of a red herring. I'm presuming these issues are about this "lion's share" of the taxes, and the people who actually pay above the mean federal income taxes, with relatively rare exception, are going to be people who itemize---even in WA state, more than 4/5ths of households with incomes above $100k itemize).

Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states’ residents pay high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!

Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!

Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

I think you are fundamentally misunderstanding which statement by Viking Thor I was originally disagreeing with.

Yup, and that's exactly the effect I'm trying to control for: It costs more tax dollars to provide the same services in SF or NYC than in the Twin Cities or Denver.

Why is this relevant?

Your data shows (roughly) that high-tax states high federal taxes, as is, with the SALT deductions. Whether they do it with thriving economies or not doesn't even seem relevant .

Also, in some sense, within a country with one currency and freedom to relocate, in the longish term I think it would be relatively accurate to say that cost of living is a decent proxy for the strength of the economy, although nice weather certainly has an effect, too!

Alright, if you're no longer trying to say that high tax states have thriving economies then I guess we're no longer in disagreement.

I won't speak for Viking Thor (who would dare!), but what matters for any meaningful underlying question, I think, is whether the high state/local tax jurisdictions already pay relatively greater amounts into the federal income tax pool (the non-specific "lion's share" in Viking Thor's post). I think you've done a nice job demonstrating that they pay more, but I don't know what we'd call "the lion's share."

You've misapplied correlation analysis, though, as if the (meaningful) claim were that higher state and local taxes correlate with higher federal tax contributions, which adds in the noise of states where the residents do not pay high federal taxes in the first place. If the "high tax" states have indeed paid "the lion's share" of the federal income taxes, than that's the end of the question and the r^2 value of the analysis you did (with a mixed bag of correlations among low-tax states and states that don't contribute greater than average federal tax revenues) is totally irrelevant to the claim.

I think you are fundamentally misunderstanding which statement by Viking Thor I was originally disagreeing with.

Sorry if I misunderstood, but the focus of your long post (reply 360) was clearly about the relationship between high state taxes and contributions to federal taxes, with only an unspoken, tangential relationship to the “thriving economy” point. There seem to be far more straightforward ways to address which states have thriving economies (regardless of what that means) than COLA-adjusting their contributions to federal income tax revenue.

I read the part of Viking Thor's post that I quoted in #360 as an argument that there was, in fact, a causal relationship between states choosing to apply higher taxes to themselves, and improved economies that allowed them to pay more back to the federal government. I've run into people who do argue this point (essentially that higher tax states spend more on education and economic development and hence over time end up with much larger economies), so it didn't seem implausible that someone would hold such a view. I didn't think there was likely to actually be a big effect on economic health from state level taxes, and reading that post pushed me to do some comparisons that were not consistent with a link between how much tax a state choses to impose on itself and the contributions it makes back to the federal budget.

As far as I can tell, you're not interested in defending the model I'm arguing against, so I'm not actually sure what view it is that you think I hold and that you disagree with.

I read the part of Viking Thor's post that I quoted in #360 as an argument that there was, in fact, a causal relationship between states choosing to apply higher taxes to themselves, and improved economies that allowed them to pay more back to the federal government. I've run into people who do argue this point (essentially that higher tax states spend more on education and economic development and hence over time end up with much larger economies), so it didn't seem implausible that someone would hold such a view. I didn't think there was likely to actually be a big effect on economic health from state level taxes, and reading that post pushed me to do some comparisons that were not consistent with a link between how much tax a state choses to impose on itself and the contributions it makes back to the federal budget.

As far as I can tell, you're not interested in defending the model I'm arguing against, so I'm not actually sure what view it is that you think I hold and that you disagree with.

I took Viking Thor’s post somewhat differently (as making the simpler claim that high-tax states already pay the lion’s share of federal taxes, notwithstanding SALT deductions), and then took your post as disputing that. Sorry for the misunderstanding (er, I mean, you’re just like Hitler ...).

401(k) tax treatment is not totally out of the woods yet. It looks like Sen. Hatch offered an amendment to Rothify the over-50 catch up contributions.

People over 50 would no longer be able to make excess contributions to workplace retirement plans from their pretax earnings under an amendment that was filed by Senate Finance Chairman Orrin Hatch ahead of the tax markup Monday.

The amendment would raise the “catch up” contributions to retirement savings plans under section 401(k), 403(b) and 457(b) to $9,000, but require that they be Roth only. Currently, almost all employers offering 401(k) plans allow eligible workers age 50 and over to make additional contributions, which are capped $6,000 for 2017, on top of the standard $18,000 limit.

I'm all for simplifying the tax code, limiting itemized deductions and lowering corporate taxes (assuming corporate loopholes were also limited but the senate plan of territorial system is ludicrous.) But repealing the estate tax, taxing PHD students (looks like senate will repeal this) and lowering taxes for the top .1% shouldn't be part of the plan. In fact, I think there should be some sort of Buffet rule where the highest earners should pay a certain %.

Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.

In addition, some sort of spending reduction should be in place. Start off with the military.

I am in almost complete agreement with your statements.

And those complaining about paying $18k in property taxes in their state and not being able to deduct that...I'd be complaining about the high tax in that state and trying to move away from that state or try to influence your state to reduce taxes rather than keeping another complicated deduction in federal income tax laws.

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

The key distinction here is that we don't usually tax money, we tax transactions. All money has been taxed before. But the government normally only taxes money when it moves or changes hands (property taxes being the obvious exception, and the least philosophically defensible form of taxation that we still use that I can think of). We tax income because the employer is transferring money to the employee. We tax sales because the individual is transferring money to a business. Government facilitates and protects these transactions, so it takes a cut of the transaction.

But why does it make sense to charge someone money just to OWN something. Not to use it, or sell it, or give it away or invest it or anything. Property taxes are basically rent you have to pay to the government because government owns everything and you own nothing. It makes the whole concept of "ownership" into a joke. We should all admit that a property deed is just a fancy lease.

What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

I think the idea behind the standard deduction is that we all need some amount of money just to survive, and taxes shouldn't prevent you from surviving. So we exempt the first chunk of income, up to the minimum that we think is necessary for survival.

We use the standard deduction instead of making everyone itemize because not everyone has anything to itemize, and those people still need to have some income exempted so that they can survive.

Deductions and exemptions are phased out at higher incomes as a sneaky way of raising the marginal rate on that upper income. Those people have more than enough to survive, so we tax their surplus at a higher rate in order to allow all the poor people to not have to pay taxes on the income they need to survive.

And those complaining about paying $18k in property taxes in their state and not being able to deduct that...I'd be complaining about the high tax in that state and trying to move away from that state or try to influence your state to reduce taxes rather than keeping another complicated deduction in federal income tax laws.

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Even without the loss of the SALT deduction, the highest-tax states are eventually going to have reduce their tangled bureaucracies and lower their entitlement spending to stay solvent. New York is suffering from loss of mid to high income residents as well. The state just put through a small (1%) tax cut for the middle income bracket, because of this very issue.

One more cut like that will balance out the federal tax increase I'd get hit with if the GOP tax bill passes in its current form.

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

It’s all arbitrary. There’s no cohesive philosophy to it.

In order: I'm not sure, but I've always assumed the argument was making life simpler for IRS audits because more people's tax returns will be easier to verify. Absolutely just as logical, although it'd also be just as logical to just say no one can itemize and we'd get rid of the whole argument over what is and isn't deductible once and for all. Because our congressional reps are so afraid to raise tax RATES that they resort to weird tricks to raise total taxes paid, even if it creates an incredibly messy tax code and means that the actual marginal tax rates sometimes go down instead of up as people make more money.

@sol I do wonder if views about property taxes would be different if more people owned their homes free and clear without a mortgage. With a mortgage you have to write a check every month or lose your house anyway so it's harder to get too upset about the government also taking a piece of that check. Without a mortgage the inability to really own real estate probably becomes more clear.

Deducting tax is now complicated? I don't think you should have to use taxed dollars to pay taxes...but what do I know.

Wouldn't this mean that one couldn't impose both a sales tax and an income tax? Or an income tax and an estate tax? Or a corporate income tax and a tax on dividends?

What is the standard deduction all about, anyway? Wouldn’t it be just as logical to say that everyone may only itemise? Why are deductions and the personal exemptions phased out at higher incomes?

It’s all arbitrary. There’s no cohesive philosophy to it.

In order: I'm not sure, but I've always assumed the argument was making life simpler for IRS audits because more people's tax returns will be easier to verify. Absolutely just as logical, although it'd also be just as logical to just say no one can itemize and we'd get rid of the whole argument over what is and isn't deductible once and for all. Because our congressional reps are so afraid to raise tax RATES that they resort to weird tricks to raise total taxes paid, even if it creates an incredibly messy tax code and means that the actual marginal tax rates sometimes go down instead of up as people make more money.

@sol I do wonder if views about property taxes would be different if more people owned their homes free and clear without a mortgage. With a mortgage you have to write a check every month or lose your house anyway so it's harder to get too upset about the government also taking a piece of that check. Without a mortgage the inability to really own real estate probably becomes more clear.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias: 1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening. 2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias: 1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening. 2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.

It's not quite as bad as it sounds since that website is comparing average residential property taxes to median income. This introduces two sources of bias: 1) Things like household incomes and property values have a long right tail in their distributions, so averages will be significantly higher than medians. Comparing either median income to median property tax or average income to average property tax is going to be a fairer comparison and make the numbers look a little less frightening. 2) About 60% of NJ residents own their homes. Renters tend to be poorer than home owners, so the ratio of the median residential property tax rate to the median income of households that own a home would be less frightening than when renters are included on the income side.

To be clear, I've no doubt that NJ property taxes really are ridiculously high, I'm just pointing out a couple of reasons why they're not quite as bad as some people might think from the numbers in that link.

There's a likely third source of bias, which is taking property tax bills and dividing them by income, without regard to the fact that there are many multi-family and apartment buildings where one bill represents many doors. If the "study" doesn't mention that they controlled for that, I'd assume they didn't.

Senate Majority Leader Mitch McConnell said Friday that he "misspoke" when he had previously said nobody in the middle class would get a tax increase under the new GOP plan, according to The New York Times.

It's not hard at all. You just have to add a tax bracket that is higher than current brackets. It can start at extremely high levels if you like. After all the current plan already has a tax rate that doesn't kick in until you hit a million dollars.

On the property tax issue, the federal government cannot levy a property tax on real property, only the states can. That is because the state (not the U.S.) is the allodial owner of all real property within its borders. This system goes all the way back to William the Conqueror in 1066. In a very real sense, if you own real property in fee simple absolute you are, in fact, merely holding that property as a tenant on behalf of the state. Your property tax paid to the state, or its municipal subsidiaries, is in some sense a form of rent that you and your heirs will pay in perpetuity. This is also why the state has the right of eminent domain to condemn your property and put a highway through your front yard.

According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots. They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss. Generally it sucks because it prevents you from minimizing your taxes.

Understandably the fund companies are opposed to this because it hurts the average investors.

Whoa, didn't realize that deferred compensation was also being axed. I take part in a 409a plan with my company, and while it's less than 10% of my income, the taxes on that income alone pushes my family back into the "this new plan increases my taxes" group. Is it just me, or as this plan begins to get carefully dissected, does it not seem like the number of constituencies that will be against it continue to pile up?

I don't know if people have noticed but AMT is getting repealed as well.

You really have to be making some pretty decent cash to get hit with AMT.

Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed.

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k. I'm not sure how you define "decent cash" though for a 2-income couple. I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT." And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us. Most likely we'll be paying more because we live in CA.

According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots. They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss. Generally it sucks because it prevents you from minimizing your taxes.

Understandably the fund companies are opposed to this because it hurts the average investors.

This is ridiculous, but I suspect it just means that investors in taxable accounts will just need to manage multiple accounts to substantially get around the issue, as presumably lot selection will not cross accounts. Lots of paperwork and aggravation to get an effect similar to today with no practical advantage to the government.

I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage). Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero. Is that correct?

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I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage). Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero. Is that correct?

I'm no expert, but I think that under the Senate rules, to use reconciliation, the bill has to be budget related. I think it would be fairly easy to argue that eliminating the mandate is budget related, since it would save $338M (I think that was the number I saw) over 10 years. So I think they could eliminate the mandate as a matter of Senate rules.

However, I do think that eliminating the mandate makes it politically more difficult to get a tax bill passed quickly. I think that is why the suggestion hasn't gained much steam yet from what I have heard.

I don't know if people have noticed but AMT is getting repealed as well.

You really have to be making some pretty decent cash to get hit with AMT.

Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed.

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k. I'm not sure how you define "decent cash" though for a 2-income couple. I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT." And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us. Most likely we'll be paying more because we live in CA.

Interesting. We're above that threshold and have never paid AMT. The complexities of tax...

Seems like Republicans are shooting themselves in the foot with the ACA mandate repeal. I think it's going to make it extremely difficult to pass the tax bill with that included. Not that I'm upset about it. Better the devil you know...

According to this article, they want to change the rules about which lots you are allowed to sell if you have multiple tax lots. They want to use the FIFO - first in and first out rule so you'd always have to sell the oldest first even if you could sell a newer one for a tax loss. Generally it sucks because it prevents you from minimizing your taxes.

Understandably the fund companies are opposed to this because it hurts the average investors.

This is ridiculous, but I suspect it just means that investors in taxable accounts will just need to manage multiple accounts to substantially get around the issue, as presumably lot selection will not cross accounts. Lots of paperwork and aggravation to get an effect similar to today with no practical advantage to the government.

It’s just part of how they are gaming the system by trying to shift as much tax revenue into the 10 year planning horizon. Those with enough money/time to structure in new complicated ways will be fine but most will be slightly worse off. I keep seeing things that likely make the tax code more complicated (e.g., the 25% pass through rate that’ll be a boon for lawyers and accountants).

I'm guessing this would take a form similar to what was attempted earlier this year (no penalty for no insurance, but a delay for adding coverage). Technically, under reconciliation, I don't thing they can eliminate the mandate but they can reduce the fines to zero. Is that correct?

I'm no expert, but I think that under the Senate rules, to use reconciliation, the bill has to be budget related. I think it would be fairly easy to argue that eliminating the mandate is budget related, since it would save $338M (I think that was the number I saw) over 10 years. So I think they could eliminate the mandate as a matter of Senate rules.

However, I do think that eliminating the mandate makes it politically more difficult to get a tax bill passed quickly. I think that is why the suggestion hasn't gained much steam yet from what I have heard.

Based upon the link, it has not only gained steam but appears to be "full steam ahead!" If/when this winds up in the final approved Senate bill, having the repeal in there will make it even more difficult for house members to vote against it. This may be part of the play at this point.

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Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT. Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts? Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT. Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts? Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much.

I mean probably more like $84k after all of those deductions (that's the 26% tax rate), but then many of those deductions stop counting. I believe (thanks google) that the 28% AMT rate hits at around $150k, after all of those deductions.

So, if you've got two 40-something engineers (even though my own pay is crap), and you live in CA with a very high mortgage interest and high state tax, it doesn't really matter because many of those deductions don't count. Turbo tax does all that math for you - put in the deductions for state tax, mortgage interest, childcare, charitable donations, etc. and then...you click the "check AMT" box and it says "just kidding! You really owe this amount." So yes, I have mortgage deductions and state tax deductions and even childcare deductions, but I'm pretty sure I shouldn't even bother with the FSA, because I do the paperwork but we end up paying it back anyway.

State tax deductions, for example, are not allowed per AMT. We are taxed at 9.3%. That's a big chunk.

My coworker said "I never click that box", so I guess maybe there's an out??

Uh, no.

Or, perhaps your coworker is secretly hoping for the ultimate retirement plan: all food, clothing, and shelter paid for by the government. The interior decor is a bit spartan, though, unless one likes iron bars.

More to the point, there are so many moving parts to the AMT that making generic "if you make X you will (or won't) have to pay AMT" statements is a fool's errand.

I don't know if people have noticed but AMT is getting repealed as well.

You really have to be making some pretty decent cash to get hit with AMT.

Really when we're talking about these cuts there a few bread crumbs for the peasants but the upper middle class is going to get majorly effed.

The wealthy and uber wealthy will dance their way to trickle down.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k. I'm not sure how you define "decent cash" though for a 2-income couple. I know when I was discussing the AMT with one of our directors (single income family) he said "be careful about your stock, if you don't exercise correctly you'll get hit with AMT." And I said "dude, we have paid the AMT every year for a long long time."

But as he's never been a 2-income couple - even though he has a high income - he didn't realize that it takes effect so early (esp. in a high tax state like CA).

So, I haven't run the numbers, but I'm guessing with the tax increase + AMT, it's gonna be a bit of a wash for us. Most likely we'll be paying more because we live in CA.

Interesting. We're above that threshold and have never paid AMT. The complexities of tax...

Well, I don't know if it's complex---it just means that you paid more than would have been due under the AMT.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts?

It is all such a hodge podge. I'm just looking at your list above, thinking "allowed under AMT, disallowed, disallowed, may be phased out, comes off the top, comes off the top, allowed under AMT, and comes off the top," and thinking the hacked-together nature of it is all so silly. I paid AMT in plenty of years where I had no itemized deductions other than state income taxes and charitable contributions (which are "allowed" for the AMT anyway, so it was really attributable to the state taxes). I think up to 10% of my federal income tax bill has come from the AMT addition in some years; this year it will be about 0.7%, so maybe I'm getting to the end of my AMT years regardless of whether it's killed off.

Married filing jointly, AMT starts at around $84,000, and the higher tax rate at around $150k.

We make more than that and have never even come close to paying the AMT. Did you mean $150k after mortgage interest and property taxes and state and local taxes and personal and dependent exemptions and HSA contributions and FSA contributions and charitable giving and maxing out 401k and 457b accounts? Yea, if you're banking $150k in take-home pay after all of that, you probably need to be paying AMT because you're making approximately double that much.

AMT is a sort of phase-in, so "starting" around $84k doesn't mean that much unless you have a LOT of deductions

My coworker said "I never click that box", so I guess maybe there's an out??

Uh, no.

Or, perhaps your coworker is secretly hoping for the ultimate retirement plan: all food, clothing, and shelter paid for by the government. The interior decor is a bit spartan, though, unless one likes iron bars.

More to the point, there are so many moving parts to the AMT that making generic "if you make X you will (or won't) have to pay AMT" statements is a fool's errand.

I was joking. I think it's interesting that you have to actively "check" a box to calculation if you should pay the AMT.

It's good that Turbo tax does it for you because there are so many rules as to what's allowed and what's not allowed as a deduction under the AMT.